F15 Test 2 Sample Test Problems (key)

# F15 Test 2 Sample Test Problems (key) - SFL 260 Sections 1...

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SFL 260 Sections 1 Dr. E. Jeffrey Hill Exam 2 (Sample Math Problems) 80. Jeremy borrows \$12,000 to buy a used mini-van for his family (a wife with three children). The annual interest rate of the car loan is 5.75%. It is a 60-month loan. The bank tells him that his monthly payment (at the end of each month) is \$________. He wants to pay off the loan quicker, so he decides to make a payment of \$300 each month (starting at the end of the first month). How long will it now take Jeremy to pay off the loan (in months)? PV = 12000 I = 5.75/12 N= 60 PMT = ? <230.60> Monthly Payment = 230.60 PV = 12000 I = 5.75/12 N= ? 44.5127 PMT =<300.00> [email protected]\$300/mo = 44.5127 81. Christina needs a late-model used car for her family. She has an excellent credit rating of 789. What would be the monthly payment on a simple interest auto loan of \$19,500 over a four year period assuming an annual interest rate of 4.9%? Assume an annuity due (payment at the beginning of the month or in other words “annuity due”). Begin Mode PV = 19500 I = 4.9/12 N= 12*4 PMTad = ? <446.37> Monthly payment = \$446.37 82. Christina got lost in Antarctica for 5 months and missed several credit card payments. Her credit dropped to 575. Now, what would Christina’s monthly payment be for the same auto loan with an annual interest rate of 8.9%? (Also, annuity due). How much interest would she pay over the four year period? Begin Mode PV = 19500 I = 8.9/12 N= 12*4 PMTad = ? <480.77> Monthly payment = \$480.77 Interest = 23,076.896payments – 19500 principal = 3576.96 interest paid 1

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83. James is in love with Abby. Before proposing, he bought a beautiful \$3,600 diamond engagement ring and paid for it with his high-interest Visa card. If the minimum payment is \$60 per month and James only pays the minimum each month, how many months will it take to pay off his \$3,600 credit card (the company charges 19% APR)? How much interest will James pay on this loan? PV = 3600 I = 19/12 PMT = <60> N = 190.7 Months 190.7 (months) * 60 (monthly payment) = 11442 (total payments) – 3600 (principal) = \$7842 (interest payments) 84. Hannah and Josh borrow \$40,000 from Hannah’s father, Ed, for the down payment on their first house so they can avoid private mortgage insurance. Ed has asked that they pay back the \$40,000 in five years and is only asking for 2.5% interest compounded monthly (to protect him from inflation). If
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• Spring '11
• Kawai
• Taxation in the United States, tax credit, monthly payment, child tax credit

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